TIDMBVS
RNS Number : 9416A
Bovis Homes Group PLC
29 March 2017
Bovis Homes Group PLC - Annual Report and Accounts 2016
Annual Report and Accounts 2016, Notice of Annual General
Meeting, Proxy Card
Copies of the above documents have been submitted to the
National Storage Mechanism and will shortly be available for
inspection at www.hemscott.com/nsm.do
The documents are being mailed to shareholders and are available
on the Company's website at
www.bovishomesgroup.co.uk/annualreport2016
Annual Report and Accounts 2016 - publication required by DTR
6.3.5
The Company published its Preliminary Results for the year ended
31 December 2016 on 20 February 2017. In order to comply with DTR
6.3.5 it is now publishing, in unedited full text, information
contained in the annual financial report of a type required to be
disseminated in a half-yearly financial report. To maintain
coherence, this repeats some of the information contained in the
Preliminary Results announcement.
The full annual financial report is available on the Company's
website at www.bovishomesgroup.co.uk/annualreport2016
Bovis Homes Group PLC - Annual Report and Financial Statements
2016
Chairman's statement
2016 was a difficult year for Bovis Homes with operational
challenges following a period of ambitious growth. Whilst we
achieved strong growth in the first half of 2016, we were unable to
deliver our anticipated unit sales and customer service performance
in the second half. As a result, we saw earnings fall year on
year.
This shortfall in performance had two underlying causes which
inevitably have their origins in preceding periods. Firstly, our
production processes have not been sufficiently robust to cope with
the twin pressures of our growth strategy and the resource
shortages across the industry. Secondly, we have not designed and
resourced our customer service proposition and processes
appropriately to deliver a 'customer first' culture.
In order to address both of these we have embarked on a
programme to deliver significant and urgent improvement in
underlying processes across the business, focused on the delivery
of the highest quality of product and service to our customers. In
taking these actions we will slow the Group's rate of production
for 2017 and are targeting completions volumes for the year to be
c. 10% to 15% below prior year's level, before a return to normal
industry production levels.
The fundamentals of the business remain strong with our market
positioning reflected in our high quality southern biased land
bank. The land additions executed in 2016 have further enhanced our
land bank and ensured we hold over four years of owned consented
land supply together with substantial further opportunity in our
strategic land interests.
Given the clear need to ensure we optimise the return achieved
on the Group's high quality land assets, we are undertaking a
fundamental review of our structure and strategy during 2017, to
include our geographic coverage, our organisation design, the basis
of capital allocation to our land bank and other assets, and our
medium term aspirations for growth.
The housing market
The Board closely monitors UK housing market conditions as we
progress through the cycle. We believe that the key factors which
supported the positive market conditions in 2016 remain in place
for 2017.
The fundamental lack of supply in the UK housing market and the
current strong demand from customers together provide a robust
footing for the business. The positive Government support for house
building was reconfirmed in the recent Housing White Paper. In
particular the residential planning regime is ensuring that land
supply to the market is ahead of production rates and the Help to
Buy scheme provides confidence for our customers to invest in new
homes.
We paused our land investment around the time of the EU
referendum vote but have subsequently continued to invest in land
in a disciplined manner to take advantage of the continued strength
in demand in our core regional markets combined with a continuing
flow of good land acquisition opportunities.
The current shortage of skilled construction labour in the
industry remains a major short term operational challenge for the
industry as a whole. This constraint has continued to impact our
business during 2016. We are working hard to bring new people into
the sector and we continue to invest in developing our own
construction teams and support our subcontractors through
apprenticeship schemes.
Dividends and earnings per share
The Group has retained the strength of its balance sheet during
2016 with an improved net cash position at year end. We delivered
earnings per share of 90.1p with full year profits impacted by the
shortfall in completions and increased costs including a one-off
GBP7 million customer care provision. Given the strength of our
balance sheet and our confidence in the future prospects of the
business, a final dividend for 2016 of 30.0 pence per share will be
recommended. When combined with the interim dividend this provides
a total dividend of 45.0 pence for the year, an increase of 13% on
2015. The final dividend will be payable on 19 May 2017 to
shareholders on the register on 24 March 2017.
Whilst there will inevitably be an impact on our earnings and
cash flow from the actions we are taking in 2017, the Board intends
to recommend maintaining the dividend for 2017 at the declared
level for this year confirming its confidence in the future
potential of the business.
People
We continue to invest in our people, and our training and
development programmes will be extended further in 2017, supported
by the launch of the national Bovis Homes Training Centre.
The commitment and skill shown by the Group's employees despite
the difficulties faced during 2016 continues to impress me and, on
behalf of the Board, I would like to thank them all for their
dedication and hard work. I would also like to extend my thanks to
our subcontractors and suppliers who are such a key component of
our business.
The Board
I would like to thank my colleagues for another year of support
and positive challenge. Nigel Keen joined the Board during the year
and we have already benefitted substantially from his insight and
experience. I would also like to express my thanks to David
Ritchie, our previous Chief Executive, who stepped down in January
2017 after eighteen years of valued service. Earl Sibley, the Group
Finance Director, has taken on the role of Interim Chief Executive
and the search for a permanent Chief Executive Officer is
underway.
The future
Despite the difficulties of 2016, the Board remains confident in
the Group's abilities to deliver improved returns to shareholders.
The process of transformation is already underway under Earl
Sibley's interim leadership and I am confident the plans in place
will address the operational weaknesses we have seen in our
business, and focus us once again on delivering high quality
product and service to our customers. Further, we will undertake a
strategic and structural review of the business to ensure we meet
our commitment to delivering the highest possible returns from our
valuable land assets.
Ian Tyler
Chairman
Interim Chief Executive's Statement
Bovis Homes has pursued an ambitious growth strategy over the
past five years with completions almost doubling over this period.
This fast growth has led to progressively developing operational
challenges across the business.
Whilst we achieved strong growth in the first half of the year
we were unable to deliver our planned level of completions for the
second half, with a shortfall of 180 private homes in December.
This reflected underlying weaknesses in our production processes
and resulted in higher than expected costs.
Our customer service standards have been declining for some time
and combined with the delays to production towards the year end, we
have entered 2017 with a high level of customer service issues. Our
customer service proposition has failed to ensure that all of our
customers receive the expected high standard of care. The Group has
taken a one-off GBP7 million customer care provision in 2016 to
address this high level of customer issues. After taking this
provision, the Group delivered a profit before tax of GBP154.7
million, below our previously stated range of GBP160 to GBP170
million.
The fundamentals of our business remain strong. We have
continued to invest in our consented land bank which stands at
GBP1,020.6 million, representing over four years of high quality
land supply, and our balance sheet remains robust with increased
year end net cash of GBP38.6 million.
Having assumed the role of Interim Chief Executive on 9 January
2017, I have established a clear set of operational priorities for
2017 and actions are already being taken. We are performing an end
to end review of our production processes to ensure we develop to
programme and deliver our customers the high quality homes they
expect. We are fully committed to putting our customers back at the
centre of everything we do and to delivering a much improved level
of customer service. We will strengthen both our regional
management teams and functional leadership, and continue to invest
in our people to establish consistent best practice across all
regions of the Group.
2017 operational priorities
The implementation of our operational priorities has commenced
in the early weeks of 2017 and is focused on:
-- Developing to programme
-- Transforming customer service
-- Leadership and operational excellence
Developing to programme
The business has suffered from weakness in our production
processes which has manifested in our development programmes not
delivering to plan, in particular around the half year and year end
periods when we have had a heavy weighting of completions.
We have commenced an end to end review of our build process from
the point we acquire a development to the timing of the final
completion. We will bring in external best practice to complement
good internal procedures where appropriate, and will benchmark
across all our regions. In particular we are focused on:
-- Adding new senior operational resource to target a reduction
in build times, improve build quality and ensure we have the
optimum resourcing models
-- Investment in resourcing of and training in our build management system
-- Improved communication with our supply chain, working as a
collaborative partnership throughout the build process
-- Ensuring common understanding and adherence to our best practices across all regions
-- Formal cross functional development project teams to bring
effective collaboration and a high level of internal customer
service
Achieving better management of our build programme and
developing to plan will result in a significant improvement to our
build efficiency.
Transforming customer service
The Group's customer service levels have experienced a decline
in recent years, as evidenced by our HBF customer satisfaction
rating. At the beginning of this year we commenced a clear
programme of actions to arrest this decline and to progressively
return our HBF rating to the top quartile of listed housebuilders.
A customer service task force has been established with its
immediate priority to address outstanding concerns from customers
within our two year warranty period.
We are increasing the resource across our customer service
function to improve both our project management capability and our
day to day operational capacity. We have additional staff dealing
with customer enquiries and more operatives on the ground working
in customers' homes.
We are reviewing all of our customer service procedures and
controls to ensure best practice across all regions, and are
already progressing with:
-- Improved customer service training for all staff
-- Enhanced quality assurance processes prior to homes being
handed over, making our customers an integral part of that
process
-- Improvements to our customer responsiveness and communication
-- Review of complaints procedures for the periods both pre and post legal completion
-- The formation of a Homebuyers Panel composed of customers who
will provide advice and challenge as we review all aspects of our
customer service in the coming months
Leadership and operational excellence
Last year we saw an increased level of investment in our people
through training and development programmes and this will be
extended further during 2017, supported by the opening of the Bovis
Homes Training Centre.
The improvement of both external and internal customer service
and the driving of a cultural change in how we operate, are at the
core of our leadership development programme. Our values of
quality, caring and integrity should stand at the centre of our
decision making and inform how we effect operational changes.
As we commence 2017 our eight regional businesses are fully
operational, having opened three new office locations in close
proximity to our developments during 2016. We are focused on
strengthening our regional management teams and establishing
functional excellence across the Group. To further develop our
functional leadership, our group commercial function introduced in
2016 will be complemented by new senior leadership positions for
both customer service and development activities.
Improving capital efficiency
Alongside these operational priorities we remain focused on
progressing balance sheet opportunities in 2017 to improve capital
efficiency and deliver enhanced shareholder returns. These include
the sale of part or all of our shared equity assets, a reduction in
part exchange assets, and the continuation of land sales where
appropriate. We are also undertaking a detailed review of the ways
in which we can maximise capital efficiency on some of our larger
strategic sites including Wellingborough, in particular the
potential for strategic partnerships.
Land investment strategy
We continue to pursue a low risk approach to land investment
targeting greenfield, traditional, two storey, family housing in
Southern biased locations, sourced from both the consented land and
strategic land markets.
In 2016, we acquired 27 sites following the acquisition of 35
sites in 2015, with the Group having deliberately paused its
investment in land around the time of the EU referendum. We took
the opportunity to increase our land acquisition hurdle rates in
June to levels which have since been maintained.
Consented land bank 2016 2015
-------------------------------- --------------------------------- ----------------
Consented plots added 3,047 6,058
Plots in consented land bank
at year end 18,704 19,814
Land bank years 4.7 5.0
Land value GBP1,020.6m GBP1,013.7m
-------------------------------- --------------------------------- ----------------
Sites added 27 35
Sites owned at year end 133 142
-------------------------------- --------------------------------- ----------------
Average selling price 271,000 247,000
Average land plot cost 52,400 49,200
-------------------------------- --------------------------------- ----------------
Proportion in south of England 78% 76%
-------------------------------- --------------------------------- ----------------
The 3,047 plots added to the land bank in 2016 have an estimated
future revenue of c. GBP950 million and an estimated future gross
profit potential of c. GBP260 million based on sales prices and
build costs at the point of appraisal, delivering an estimated
future gross margin of 27.2%. The average return on capital
employed of the land acquired based on investment appraisal at the
time of acquisition is c. 30%.
The estimated gross profit potential of the Group's total
consented land bank plots as at 31 December 2016, based on
prevailing sales prices and build costs, has increased to c.
GBP1,300 million with a gross margin of 25.6% (31 December 2015:
GBP1,247 million at 25.5%).
The successful conversion of strategic land continues to be a
key driver of value for the Group. New strategic land investments
added 3,346 plots into the strategic land bank, giving a total of
25,494 strategic plots at the year end across 89 strategic sites.
The strategic land bank reflects positively the Group's strategy of
land acquisition with 67% of the strategic plots in the South of
England.
During 2016, the Group converted 562 plots from the strategic
land bank into the consented land bank. This was a lower number of
plots than in prior years due to timings of consents but we are
already seeing success early in 2017 on a number of sites including
503 additional plots at Bishops Stortford transferring into the
consented land bank.
We have signed the revised s106 for our key site at
Wellingborough which represents the largest single investment on
our balance sheet (c. GBP50 million). We have progressed well with
the main infrastructure road into the housing area and will
commence building houses later this year. We are currently looking
to identify partners for this development.
We continue to develop our key strategic site at Wokingham with
the first homes legally completing during the year and a further
land sale going ahead as planned. The proceeds from this land sale
largely covered the latest deferred land payment for the site
thereby managing the capital employed on this key scheme.
In pursuit of capital efficiency the Group completed the sale of
three parcels of land during 2016, and further land sales are
planned in 2017.
2016 Housing delivery
In 2016 the Group delivered 3,977 homes (2015: 3,934). Private
legal completions (excluding PRS) decreased by 1% to 2,884 (2015:
2,901) reflecting the shortfall in private completions at the year
end. Legal completions of social homes were 1,074 (2014: 848),
representing 27% of total legal completions (2015: 22%).
Average active sales outlets of 99 were lower than the 102 in
2015, with the Group having closed more sites than previously
anticipated. Despite this reduction in active sales outlets, an
increase in net private reservations per site per week to 0.58
(2015: 0.56) enabled the Group to achieve 2,960 private
reservations, broadly in line with the 2,986 achieved in 2015.
Our average sales price increased by 10% to GBP254,900 (2015:
GBP231,600) with the average sales price of private legal
completions (excluding PRS) 10% higher at GBP306,000 (2015:
GBP272,100). These average prices benefitted both from the improved
geographical and product mix on new sites driving higher sales
prices and some modest price inflation. The increased total revenue
supported an improvement in capital turn to 1.12 (2015:1.05).
Despite the slippage in production that caused difficulties
towards the end of 2016, the overall production levels during the
year were over 4,200 notional units of build, 7% ahead of 2015.
Housing work in progress ended 2016 higher at 1,166 units worth of
production (2015: 929), with work in progress turn as a result
reducing to 2.8 times (2015: 3.5). Looking forward through 2017 we
aim to align our production rates better with our sales rates and
target a more even flow of production and completions through the
year.
The Group's average construction cost per square foot in 2016
excluding the one off customer care provision was 11% higher than
in 2015. We continue to see constraints on the availability of
skilled labour across the sector resulting in increased market
labour costs, and for the year inflationary pressures increased our
total build costs by c. 5%. Product mix and the delivery of
completions in higher value locations also increased our average
build cost, whilst inefficiencies in our production processes and
phasing, in particular the heavy weighting of completions to the
year end, were also a factor.
Managing our construction cost base remains a key focus for
management and delivering on our operational priority of developing
to programme will result in improved build efficiency across the
Group. We are focused on strengthening our relationships with key
subcontractors, working in closer partnership with them throughout
the production process, and will continue to optimise materials
costs through Group-wide purchase agreements.
The Group recognised a one off GBP7 million customer care
provision at the year end as a result of a much higher level of
customer service issues. Customer service standards fell
significantly during 2016 and homes were completed, in particular
at the year end, which fell materially short of the high standard
expected. We have a customer service task force in place whose
absolute focus is to address these issues and the customer care
provision will cover the cost of the required remedial work and
appropriate compensation for affected customers.
Outlook
The Group is focused on making 2017 the year when we re-set the
business and deliver on our operational priorities. Reflecting this
we are slowing our rate of production and targeting completion
volumes for 2017 to be c. 10% to 15% below the 2016 level, before a
return to normal industry production levels. Our production rate in
early January has been slowed to support our priority focus on
customer service, and current production programmes have been
extended to allow sufficient time to ensure each home is delivered
to the high standard of quality that we and our customers
expect.
The average selling price is again expected to increase
reflecting the mix coming through our landbank. We continue to see
market inflation impacting both the cost of subcontract labour and
material supplies. To deliver on our operational priorities we will
also see an increased level of investment in 2017 across the
business.
We will continue to invest in high quality land opportunities
that meet our minimum acquisition hurdle rates but will maintain
our consented land bank at broadly current levels.
Whilst there will inevitably be an impact on our earnings and
cashflow from the actions we are taking in 2017, the Board intends
to recommend maintaining the dividend at the level declared for
2016, confirming its confidence in the future potential of the
business.
Earl Sibley
Interim Chief Executive
Financial Review
Revenue
The Group generated total revenue of GBP1,054.8 million, an
increase of 11% on the previous year (2015: GBP946.5 million).
Housing revenue was GBP1,022.8 million, 12% ahead of the prior year
(2015: GBP910.1 million) with our average sales price increased by
10% to GBP254,900 (2015: GBP231,600). Other revenue was GBP6.2
million (2015: GBP6.4 million) and land sales revenue, associated
with three land sales, was GBP25.8 million in 2016, compared to
four land sales achieved in 2015 with a total revenue of GBP30.0
million.
Gross profit
Total gross profit was GBP235.7 million (gross margin: 22.3%),
compared with GBP232.3 million (gross margin: 24.5%) in 2015. The
profit on land sales in 2016 was GBP7.7 million (2015: GBP8.8
million) as we continue the strategy of managing our capital base
through the disposal of parcels of land on large sites.
Housing gross margin was 22.2% in 2016, below the 24.4% achieved
in 2015. This was largely due to the deferral of circa 180 private
completions into 2017 which resulted in an increase in the
proportion of social completions in the year to 27% (2015: 22%)
these having lower profit margins, as well as reflecting the one
off GBP7.0 million customer care provision. This provision reflects
additional costs expected to be incurred across the business as we
conclude a higher than expected level of outstanding remedial items
on homes completed in the last two years, as well as the costs to
rectify a limited number of homes with more significant issues and
the associated compensation costs.
During 2016, our construction costs increased by 12% per square
foot, reflecting higher value site locations, the inflationary
impact of labour and materials, additional costs related to
delivering our production at peak times and the impact of the one
off customer care provision.
Operating profit
The Group delivered an operating profit for the year ended 31
December 2016 of GBP160.0 million (2015: GBP163.5 million) at an
operating profit margin of 15.2% (2015: 17.3%).
Overheads, including sales and marketing costs, increased by 10%
in 2016, as we invested in our enlarged operating structure with
average headcount growing 15% over the year and three new offices
opening to support our eight operating regions. The overheads to
revenue ratio reduced slightly to 7.1% in 2016 (2015: 7.2%) with
the further efficiencies from growing the scale of the business not
being realised due to the deferral of volume and therefore revenue
into 2017.
Profit before tax and earnings per share
Profit before tax reduced to GBP154.7 million, comprising
operating profit of GBP160.0 million, net financing charges of
GBP5.6 million and a profit from joint ventures of GBP0.3 million.
This compares to GBP160.1 million of profit before tax in 2015,
which comprised GBP163.5 million of operating profit, GBP5.2
million of net financing charges and a profit from joint ventures
of GBP1.8 million. The profit from joint ventures in 2015 included
the benefits of revaluing both the Bovis Peer LLP and IIH Oak
Investors LLP PRS property portfolios in the period.
Basic earnings per share for the year were 90.1p compared to
95.4p in 2015. This has resulted in a return on equity of 13%
(2015: 15%).
Financing
Net financing charges during 2016 were GBP5.6 million (2015:
GBP5.2 million). Net bank charges were GBP3.3 million (2015: GBP3.3
million), as a result of modestly lower net debt during 2016 than
2015 offset by a higher level of commitment fees and issue costs
amortised in 2016. We incurred a GBP5.0 million finance charge
(2015: GBP4.9 million charge), reflecting the imputed interest on
land bought on deferred terms. The Group benefited from a finance
credit of GBP2.4 million (2015: GBP2.9 million) arising from the
unwinding of the discount on its available for sale financial
assets during 2016 as well as other credits of GBP0.3 million
(2015: GBP0.1 million).
Taxation
The Group has recognised a tax charge of GBP33.9 million at an
effective tax rate of 21.9% (2015: tax charge of GBP32.1 million at
an effective rate of 20.0%). The increased tax rate is driven by a
prior year deferred tax adjustment relating to the transition of
our subsidiaries from UK GAAP to FRS 101. The Group has a current
tax liability of GBP13.9 million in its balance sheet as at 31
December 2016 (2015: current tax liability of GBP16.9 million).
Dividends
As previously communicated the Board will propose a 2016 final
dividend of 30.0p per share. This dividend will be paid on 19 May
2017 to holders of ordinary shares on the register at the close of
business on 24 March 2017. The dividend reinvestment plan gives
shareholders the opportunity to reinvest their dividends in
ordinary shares. Combined with the interim dividend paid of 15.0p,
the dividend for the full year totals 45.0p and compares to a total
of 40.0p for 2015, an increase of 13%.
Net assets
2016 2015
GBPm GBPm
---------------------------------- ---------------------- ------------------
Net assets at 1 January 957.8 879.1
Profit after tax for the year 120.8 128.0
Share capital issued 0.8 0.6
Purchase of own shares - (2.4)
Net actuarial movement on pension
scheme through reserves (14.1) 0.2
Deferred tax on other employee 2.6 -
benefits
Adjustment to reserves for share
based payments and shared equity 3.4 1.5
Dividends paid to shareholders (55.4) (49.2)
---------------------------------- ---------------------- ------------------
Net assets at 31 December 1,015.9 957.8
---------------------------------- ---------------------- ------------------
As at 31 December 2016 net assets of GBP1,015.9 million were
GBP58.1 million higher than at the start of the year. Net assets
per share as at 31 December 2016 were 757p (2015: 714p).
Inventories increased during the year by GBP130.6 million to
GBP1,449.2 million. The value of residential land, the key
component of inventories, increased by GBP6.9 million, as we
invested in line with usage. At the end of 2016, the remaining
provision held against land carried at net realisable value was
GBP3.0 million, after utilisation of GBP4.2 million during the
year. Other movements in inventories were an increase in work in
progress of GBP104.6 million driven by an increase in the
underlying level of ongoing production, the deferral of c. 180
almost complete homes into 2017 and an increase in part exchange
properties of GBP19.1 million due to the high volume of legal
completions in December.
Trade and other receivables decreased by GBP5.2 million,
primarily due to lower amounts owing from land sales. Trade and
other payables totalled GBP582.8 million (2015: GBP535.2 million).
Land creditors increased to GBP343.3 million (2015: GBP322.9
million) as we continue to take advantage of the opportunity to
negotiate deferred payment terms with our land vendors. Trade and
other creditors increased to GBP239.5 million (2015: GBP212.3
million), driven by a 7% increase in build activity over 2016
leading to a higher level of closing work in progress and an
increase in the amounts we owe to subcontractors and materials
suppliers.
Pensions
Taking into account the latest estimates provided by the Group's
actuarial advisors, our pension scheme on an IAS19 basis had a
deficit of GBP6.6 million at 31 December 2016 (2015: surplus of
GBP7.1 million). The scheme's assets grew over the year to GBP119.0
million from GBP109.3 million and the scheme liabilities increased
to GBP125.6 million from GBP102.2 million. The movements in the
liabilities in the period are driven largely by a reduction in the
discount rate applied to those liabilities as a result of changes
in bond yields.
Net cash and cashflow
Having started the year with net cash of GBP30.0 million, the
Group generated an operating cash inflow before land expenditure of
GBP307.5 million (2015: GBP329.0 million), reflecting higher
profitability and increased recovery of land cost attributable to
legal completions net of increased construction expenditure. Net
cash payments for land investment was GBP205.6 million (2015:
GBP205.8 million). Non-trading cash outflow reduced to GBP93.3
million (2015: GBP98.4 million) with greater dividends offset by
lower corporation tax payments and there were no special
contributions to the pension scheme in the year (2015: GBP7.8
million). As at 31 December 2016 the Group's net cash balance was
GBP38.6 million.
We have a committed revolving credit facility of GBP250 million
in place which was extended for one year during 2016 and now
expires in December 2021.
Earl Sibley
Group Finance Director
Statement of directors' responsibilities in respect of the
annual report and the financial statements
The directors are responsible for preparing the Annual Report,
the Directors' Remuneration Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
have prepared the Group and Parent company financial statements in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union. Under company law the directors
must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the
Group and the Company and of the profit or loss of the Group for
that period.
In preparing these financial statements, the directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether applicable IFRSs as adopted by the European
Union have been followed, subject to any material departures
disclosed and explained in the financial statements;
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and the Group and enable them to
ensure that the financial statements and the Directors'
Remuneration Report comply with the Companies Act 2006 and, as
regards the Group financial statements, Article 4 of the IAS
Regulation. They are also responsible for safeguarding the assets
of the Company and the Group and hence for taking reasonable steps
for the prevention and detection of fraud and other
irregularities.
The directors are responsible for the maintenance and integrity
of the Company's website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
The directors consider that the Annual Report and Accounts,
taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess a Company's
performance, business model and strategy.
Each of the directors, whose names and functions are listed on
pages 48 to 49 of the Annual Report confirm that, to the best of
their knowledge:
-- the Group financial statements, which have been prepared in
accordance with IFRSs as adopted by the EU, give a true and fair
view of the assets, liabilities, financial position and profit of
the Group; and
-- the Strategic Report contained in the Annual report includes
a fair review of the development and performance of the business
and the position of the Group, together with a description of the
principal risks and uncertainties that it faces.
By Order of the Board
M T D Palmer
Group Company Secretary
20 February 2017
Bovis Homes Group PLC
Group income statement
For the year ended 31 December 2016 2015
GBP000 GBP000
--------------------------------- --------- ---------
Revenue 1,054,804 946,504
Cost of sales (819,123) (714,196)
--------------------------------- --------- ---------
Gross profit 235,681 232,308
Administrative expenses (75,711) (68,778)
--------------------------------- --------- ---------
Operating profit before
financing costs 159,970 163,530
Financial income 3,035 3,348
Financial expenses (8,622) (8,583)
--------------------------------- --------- ---------
Net financing costs (5,587 (5,235)
Share of profit of Joint
Ventures 331 1,770
--------------------------------- --------- ---------
Profit before tax 154,714 160,065
Income tax expense (33,866) (32,057)
--------------------------------- --------- ---------
Profit for the year attributable
to equity holders of the
parent 120,848 128,008
--------------------------------- --------- ---------
Earnings per share
-------------------------------------------------------
Basic 90.1p 95.4p
Diluted 90.0p 95.2p
--------------------------------- --------- ---------
Group statement of comprehensive income
For the year ended 31 December 2016 2015
GBP000 GBP000
----------------------------------- -------- --------
Profit for the year 120,848 128,008
Other comprehensive income/(expense)
Items that will not be reclassified to profit
and loss:
Remeasurements on defined benefit
pension scheme (14,107) 182
Deferred tax on remeasurements
on defined benefit pension scheme 2,624 (17)
----------------------------------- -------- --------
Total comprehensive income for
the year attributable to equity
holders of the parent 109,365 128,173
----------------------------------- -------- --------
Bovis Homes Group PLC
Group balance sheet
At 31 December 2016 2015
GBP000 GBP000
------------------------------- --------------------------- -------------------
Assets
Property, plant and equipment 11,870 13,982
Investments 8,786 8,987
Restricted cash 1,444 1,451
Deferred tax assets 1,955 2,160
Trade and other receivables 5,758 1,166
Available for sale financial
assets 27,804 35,303
Retirement benefit asset - 7,117
------------------------------- --------------------------- -------------------
Total non-current assets 57,617 70,166
------------------------------- --------------------------- -------------------
Inventories 1,449,165 1,318,520
Trade and other receivables 84,992 94,843
Cash and cash equivalents 38,552 31,990
------------------------------- --------------------------- -------------------
Total current assets 1,572,709 1,445,353
------------------------------- --------------------------- -------------------
Total assets 1,630,326 1,515,519
------------------------------- --------------------------- -------------------
Equity
Issued capital 67,261 67,190
Share premium 215,057 214,368
Retained earnings 733,609 676,201
------------------------------- --------------------------- -------------------
Total equity attributable
to equity holders of the
parent 1,015,927 957,759
------------------------------- --------------------------- -------------------
Liabilities
Trade and other payables 162,612 171,306
Retirement benefit obligations 6,590 -
Provisions 812 1,327
------------------------------- --------------------------- -------------------
Total non-current liabilities 170,014 172,633
------------------------------- --------------------------- -------------------
Bank and other loans - 1,999
Trade and other payables 420,220 363,936
Provisions 10,280 2,245
Current tax liabilities 13,885 16,947
------------------------------- --------------------------- -------------------
Total current liabilities 444,385 385,127
------------------------------- --------------------------- -------------------
Total liabilities 614,399 557,760
------------------------------- --------------------------- -------------------
Total equity and liabilities 1,630,326 1,515,519
------------------------------- --------------------------- -------------------
These financial statements were approved by the Board of
directors on 20 February 2017.
Bovis Homes Group PLC
Group statement of changes in equity
Total Issued Share Total
For the year ended retained capital premium
31 December earnings
GBP000 GBP000 GBP000 GBP000
----------------------- --------- ------- ------- ---------
Balance at 1 January
2015 598,154 67,114 213,850 879,118
Total comprehensive
income 128,173 - - 128,173
Issue of share capital - 76 518 594
Deferred tax on other
employee benefits (31) - - (31)
Purchase of own shares
Share based payments (2,386) - - (2,386)
1,531 - - 1,531
Dividends paid to
shareholders (49,240) - - (49,240)
----------------------- --------- ------- ------- ---------
Balance at 31 December
2015 676,201 67,190 214,368 957,759
----------------------- --------- ------- ------- ---------
Balance at 1 January
2016 676,201 67,190 214,368 957,759
Total comprehensive
income 109,365 - - 109,365
Issue of share capital - 71 689 760
Deferred tax on other
employee benefits 48 - - 48
Purchase of own shares - - - -
Shared equity movement
re-assigned to Income
statement 2,099 - - 2,099
Share based payments 1,308 - - 1,308
Dividends paid to
shareholders (55,412) - - (55,412)
----------------------- --------- ------- ------- ---------
Balance at 31 December
2016 733,609 67,261 215,057 1,015,927
----------------------- --------- ------- ------- ---------
Bovis Homes Group PLC
Group statement of cash flows
For the year ended 31 December 2016 2015
GBP000 GBP000
------------------------------------ ----------------------- ------------------
Cash flows from operating
activities
Profit for the year 120,848 128,008
Depreciation 2,274 2,065
Revaluation of available for
sale financial assets 1,191 67
Financial income (3,035) (3,348)
Financial expense 8,622 8,583
Profit on sale of property,
plant and equipment (764) (43)
Equity-settled share-based
payment expense 1,308 1,531
Income tax expense 33,866 32,057
Share of result of Joint Ventures (331) (1,770)
Decrease / (Increase) in trade
and other receivables 15,254 (28,031)
Increase in inventories (130,647) (193,000)
Increase in trade and other
payables 42,976 168,773
Decrease in provisions and
retirement benefit obligations 7,395 (7,003)
------------------------------------ ----------------------- ------------------
Cash generated from operations 98,957 107,889
Interest paid (4,010) (2,470)
Income taxes paid (33,142) (28,515)
------------------------------------ ----------------------- ------------------
Net cash from operating activities 61,805 76,904
------------------------------------ ----------------------- ------------------
Cash flows from investing
activities
Interest received 45 75
Acquisition of property, plant
and equipment (1,787) (2,424)
Proceeds from sale of plant
and equipment 2,389 55
Movement of investment in
Joint Ventures 625 755
Dividends received from Joint
Ventures 129 377
Reduction / (investment) in
restricted cash 7 (25)
------------------------------------ ----------------------- ------------------
Net cash used in investing
activities 1,408 (1,187)
------------------------------------ ----------------------- ------------------
Cash flows from financing
activities
Dividends paid (55,412) (49,240)
Proceeds from the issue of
share capital 760 594
Purchase of own shares - (2,386)
Repayment of bank and other
loans (1,999) (44,952)
------------------------------------ ----------------------- ------------------
Net cash from financing activities (56,651) (95,984)
------------------------------------ ----------------------- ------------------
Net increase / (decrease)
in cash and cash equivalents 6,562 (20,267)
Cash and cash equivalents
at 1 January 31,990 52,257
------------------------------------ ----------------------- ------------------
Cash and cash equivalents
at 31 December 38,552 31,990
------------------------------------ ----------------------- ------------------
Notes to the financial statements
1 General information
Bovis Homes Group PLC ('the Company') is a company domiciled in
the United Kingdom. The consolidated financial statements of the
Company for the year ended 31 December 2016 comprise the Company
and its subsidiaries (together referred to as 'the Group') and the
Group's interest in associates and joint ventures.
The consolidated financial statements were authorised for issue
by the directors on 20 February 2017. The financial statements were
audited by PriceWaterhouseCoopers LLP.
The financial information set out above does not constitute the
Company's statutory financial statements for the years ended 31
December 2016 or 2015 but is derived from those financial
statements. Statutory financial statements for 2015 have been
delivered to the registrar of companies, and those for 2016 will be
delivered in due course. The auditors have reported on those
financial statements; their reports were (i) unqualified, (ii) did
not include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of
the Companies Act 2006.
2 Basis of accounting
The consolidated financial statements of the Company and the
Group have been prepared in accordance with the International
Financial Reporting Standards (IFRS) and IFRS Interpretations
Committee (IFRS IC) interpretations as adopted by the European
Union and Companies Act 2006 applicable to companies reporting
under IFRS.
The accounting policies set out below have been applied
consistently to all relevant periods presented in these
consolidated financial statements. The accounting policies have
been applied consistently to the Company and the Group where
relevant.
The financial statements are prepared on the historical cost
basis except for derivative financial instruments and available for
sale financial assets.
3 Going concern
The Directors are satisfied that the Group has sufficient
resources to continue in operation for the 12 months from date of
approval of these financial statements. The Directors reviewed
detailed financial and covenant compliance forecasts covering the
period to December 2017 and summary financial forecasts for the
following two years.
Having started the year with net cash of GBP30.0 million, the
Group again generated a strong operating cash flow during 2016,
increasing the net cash position to GBP38.6 million. As at 31
December 2016, the Group held cash and cash equivalents of GBP38.6
million and had no borrowings. On 3 December 2015, the Group
entered into a new GBP250 million committed revolving credit
facility that was extended for one year during 2016, now expiring
in December 2021, all of which was available for drawdown at 31
December 2016.
For these reasons, the Directors consider it appropriate to
prepare the financial statements of the Group on a going concern
basis.
4 Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 31 December. Control is achieved
where the Company has the power to govern the financial and
operating policies of an entity so as to obtain benefits from its
activities. The existence and effect of potential voting rights
that are currently exercisable or convertible are considered when
assessing whether the Group controls another entity. The financial
statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the
date that control ceases.
Associates are those entities in which the Group has significant
influence, but not control, over the financial and operating
policies. The consolidated financial statements include the Group's
share of the total recognised gains and losses of associates on an
equity accounted basis, from the date that significant influence
commences until the date that significant influence ceases.
A joint arrangement is an arrangement over which the Group and
one or more third parties have joint control. The consolidated
financial statements include the Group's share of the comprehensive
income and expense of Joint Ventures on an equity accounted basis,
from the date that joint control commenced until joint control
ceases. These joint arrangement are in turn classified as:
Joint Ventures whereby the Group has rights to the net assets of
the arrangement, rather than rights to its assets and obligations
for its liabilities; and
Joint operations whereby the Group has rights to the assets and
obligations for the liabilities relating to the arrangement.
5 Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements in conformity with
adopted IFRSs requires management to make judgements, estimates and
assumptions that affect the application of policies and reported
amounts of assets and liabilities, income and expenses. The
estimates and associated assumptions are based on historical
experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the
basis of making the judgements about carrying values of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
Judgements made by management in the application of adopted
IFRSs that have significant effect on the financial statements and
estimates with a significant risk of material adjustment in the
next year are discussed below.
Key sources of estimation uncertainty
Land held for development and housing work in progress
The Group holds inventories which are stated at the lower of
cost and net realisable value. To assess the net realisable value
of land held for development and housing work in progress, the
Group completes a financial appraisal of the likely revenue which
will be generated when these inventories are combined as
residential properties for sale and sold. Where the financial
appraisal demonstrates that the revenue will exceed the costs of
the inventories and other associated costs of constructing the
residential properties, the inventories are stated at cost. Where
the assessed revenue is lower, the extent to which there is a
shortfall is written off through the income statement leaving the
inventories stated at a realisable value. To the extent that the
revenues which can be generated change, or the final cost to
complete for the site varies from estimates, the net realisable
value of the inventories may be different.
A review taking into account estimated achievable net revenues,
actual inventory and costs to complete as at 31 December 2016 has
been carried out, which has identified no material net movement in
the carrying value of the provision. These estimates were made by
local management having regard to actual sales prices, together
with competitor and marketplace evidence, and were further reviewed
by Group management. Should there be a future significant decline
in UK house pricing, then further write-downs of land and work in
progress may be necessary. Further details on the carrying value of
inventories is laid out in note 3.1 of the annual report.
Available for sale financial assets
The estimation of the fair value of available for sale financial
assets requires judgement and estimation as to the quantum, timing
and value of repayment of the Group's receivable, as well as to the
choice of instrument-specific market-assessed interest rate used to
determine a discount rate. Note 4.6 of the annual report contains a
sensitivity analysis showing the impact of a change in the major
judgement factors applied in the valuation of these
instruments.
Defined Benefit Pension Scheme
The Group has an active Defined Benefit Pension Scheme, which is
subject to estimation uncertainty. Note 5.7 of the annual report
outlines the way in which this Scheme is recognised in the Group's
Financial Statements, the associated risks and sensitivity analysis
showing the impact of a change in key variables on the defined
benefit obligation.
Customer care provision
Following legal completion, the Group provides a two year
warranty that covers any defects which arise during that period.
The level of provision per completion is based on actual costs
incurred over the preceding twelve months. Judgement is applied in
determining whether this level of provision is sufficient, or
whether it should be adjusted to reflect the level of outstanding
customer rectification works at the balance sheet date.
6 Segment reporting
The Chief Operating Decision Maker, which is the Board, notes
that the Group's main operation is that of a housebuilder and it
operates entirely within the United Kingdom, there are no separate
segments, either business or geographic, to disclose, having taken
into account the aggregation criteria provisions of IFRS8.
7 Impact of standards and interpretations effective for the first time
The Group has adopted the following new standards and amendments
to standards, including any consequential amendments to other
standards, with a date of initial application of 1 January
2015:
IFRIC21 'Levies' and Amendment to IAS 19 'Employee benefits' on
defined benefit plans have both come into effect, with no
significant impact on the Group.
Other changes recommended in 'Annual Improvements 2011', 'Annual
Improvements 2012' and 'Annual Improvements 2013' have also been
implemented with no significant impact on the Group.
8 Impact of standards and interpretations in issue but not yet effective
A number of new standards and amendments to standards and
interpretations are effective for annual periods beginning after 1
January 2016, and have not been applied in preparing these
financial statements. The majority are not expected to have a
significant effect on the financial statements of the Group or the
Company, and the full effect of the following standards will be
assessed during the year ending 31 December 2017:
IFRS 15, 'Revenue from contracts with customers' replaces IAS 18
'Revenue' and IAS 11 'Construction contracts', setting out new
revenue recognition criteria particularly with regard to
performance obligations which may have some impact on the timing of
revenue recognised by the Group on certain contracts. The standard
will be effective for the period beginning 1 January 2018.
IFRS 16, 'Leases' requires lessees to recognise an asset and a
liability on its balance sheet for all operating leases above
thresholds for the value of the asset and the length of the lease
period. The standard will be effective for the period beginning 1
January 2019.
9 Accounting Policies
Revenue
Revenue comprises the fair value of consideration received or
receivable, net of value-assessed tax, rebates and discounts.
Revenue does not include the value of the onward legal completion
of properties accepted in part exchange against a new property. The
net gain or loss arising from the legal completion of these part
exchange properties is recognised in cost of sales.
Revenue is recognised once the value of the transaction can be
reliably measured and the significant risks and rewards of
ownership have been transferred. Revenue is recognised on house
sales at legal completion. Revenue is recognised on land sales and
commercial property sales from the point of unconditional exchange
of contracts. For affordable housing, revenue and costs are
recognised by reference to the stage of completion of contract
activity at the balance sheet date. When it is probable that the
total costs on a construction contract will exceed total contract
revenue, the expected loss is recognised as an expense in the
Income Statement immediately.
Where land is sold with material development obligations, the
recognition of revenue and profit is deferred until the work is
complete.
Rental income is recognised in the income statement on a
straight-line basis over the term of the lease. Lease incentives
granted are recognised as an integral part of the total rental
income.
Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost comprises direct materials and, where applicable,
direct labour costs and those overheads, not including any general
administrative overheads, that have been incurred in bringing the
inventories to their present location and condition. Net realisable
value represents the estimated net selling price less estimated
total costs of completion of the finished units.
Land held for development, including land in the course of
development until legal completion of the sale of the asset, is
initially recorded at cost along with any expected overage. Where,
through deferred purchase credit terms, cost differs from the
nominal amount which will actually be paid in settling the deferred
purchase terms liability, an adjustment is made to the cost of the
land, the difference being charged as a finance cost.
Options purchased in respect of land are capitalised initially
at cost and written down on a straight-line basis over the life of
the option. Should planning permission be granted and the option be
exercised, the option is not amortised during that year and its
carrying value is included within the cost of land purchased.
Investments in land without the benefit of planning consent,
either through purchase of freehold land or non-refundable deposits
paid on land purchase contracts subject to residential planning
consent, are capitalised initially at cost. Regular reviews are
completed for impairment in the value of these investments, and
provision made to reflect any irrecoverable element. The impairment
reviews consider the existing use value of the land and assesses
the likelihood of achieving residential planning consent and the
value thereof.
Ground rents are held at an estimate of cost based on a multiple
of ground rent income, with a corresponding credit created against
cost of sales, in the year in which the ground rent first becomes
payable by the leasehold purchaser.
Part exchange properties are held at the lower of cost and net
realisable value, and include a carrying value provision to cover
the costs of management and resale.
Trade and other receivables
Trade receivables do not carry any interest and are stated at
their nominal value as reduced by appropriate allowances for
estimated irrecoverable amounts. Other debtors include amounts
receivable from the Government in relation to the Help To Buy
scheme.
Trade payables
Trade payables on normal terms are not interest bearing and are
stated at their nominal value.
Trade payables on extended terms, particularly in respect of
land, are recorded at their fair value at the date of acquisition
of the asset to which they relate. The discount to nominal value
which will be paid in settling the deferred purchase terms
liability is recognised over the period of the credit term and
charged to finance costs using the effective interest rate
method.
Government Grants
Government grants are recognised in the income statement so as
to match with the related costs that they are intended to
compensate. Government grants are included within deferred
income.
Bank and other loans
Interest-bearing bank loans and overdrafts are initially
recorded at fair value, net of direct issue costs, and subsequently
at amortised cost.
Finance charges are accounted for on an accrual basis to the
income statement using the effective interest method and are added
to the carrying amount of the instrument to the extent that they
are not settled in the period in which they arise.
The benefit on loans with an interest rate below market is
calculated as the difference between interest at a market rate and
the below market interest. The benefit is treated as a Government
grant.
Cash and cash equivalents
Cash and cash equivalents comprises cash balances and call
deposits. Bank overdrafts that are repayable on demand and form an
integral part of the Group's cash management are included as a
component of cash and cash equivalents for the purpose of the
statement of cash flows.
Available for sale assets
Receivables on extended terms granted as part of a sales
transaction are secured by way of a legal charge on the relevant
property, categorised as an available for sale financial asset, and
are stated at fair value. Gains and losses arising from changes in
fair value are recognised directly in equity in retained earnings,
with the exceptions of impairment losses, the impact of changes in
future cash flows and interest calculated using the 'effective
interest rate' method, which are recognised directly in the income
statement. Where the investment is disposed of, or is determined to
be impaired, the cumulative gain or loss previously recognised in
equity is included in the income statement for the period. Given
its materiality, this item is being disclosed separately on the
face of the balance sheet.
Available for sale financial assets relate to legal completions
where the Group has retained an interest through agreement to defer
recovery of a percentage of the market value of the property,
together with a legal charge to protect the Group's position. The
Group participates in three schemes. 'Jumpstart' schemes are
receivable 10 years after recognition with 3% interest charged
between years 6 to 10. The 'HomeBuy Direct' and 'FirstBuy' schemes
are operated together with the Government. Receivables are due 25
years after recognition with interest charged from year 6 onwards
at a base value of 1.75% plus annual RPI increments. These assets
are held at fair value being the present value of expected future
cash flows taking into account the estimated market value of the
property at the estimated date of recovery.
Net financing costs
Finance costs are included in the measurement of borrowings at
their amortised cost to the extent that they are not settled in the
period in which they arise.
The Group is required to capitalise borrowing costs directly
attributable to the acquisition, construction and production of a
qualifying asset, as part of the costs of that asset. Inventories
which are produced in large quantities on a repetitive basis over a
short period of time are not qualifying assets. The Group does not
generally produce qualifying assets.
Equity Instruments
Equity instruments issued by the Company are recorded at the
proceeds received, net of direct issue costs.
Own Shares held by ESOP trust
Transactions of the Group-sponsored ESOP trust are included in
the Group financial statements. In particular, the trust's
purchases of shares in the Company are debited directly to equity
through an own shares held reserve.
Hedging
Derivative financial instruments are recognised at fair
value.
Income Tax
Income tax comprises the sum of the tax currently payable or
receivable and deferred tax. Income tax is recognised in the income
statement except to the extent that it relates to items recognised
directly in equity, in which case it is recognised in equity.
Tax assets and liabilities
The tax currently payable or receivable is based on taxable
profit or loss for the year and any adjustment to tax payable or
receivable in respect of previous years. Taxable profit or loss
differs from net profit or loss as reported in the income statement
because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are
never taxable or deductible. The Group's liability or asset for
current tax is calculated using tax rates that have been enacted or
substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and
liabilities are not recognised if the temporary difference arises
from non-tax deductible goodwill, from the initial recognition of
assets and liabilities in a transaction that affects neither the
tax profit nor the accounting profit, and from differences relating
to investments in subsidiaries to the extent that they will
probably not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered. Deferred tax is
calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised.
Deferred tax is charged or credited in the income statement, except
when it relates to items charged or credited directly to reserves,
in which case the deferred tax is also dealt with in reserves.
Share based payments
The Group has applied the requirements of IFRS2: "Share-based
payments".
The Group issues equity-settled share-based payments to certain
employees in the form of share options over shares in the Parent
Company. Equity-settled share-based payments are measured at fair
value at the date of grant calculated using an independent option
valuation model, taking into account the terms and conditions upon
which the options were granted. The fair value is expensed on a
straight line basis over the vesting period, based on the Group's
estimate of shares that will eventually vest, with a corresponding
credit to equity except when the share-based payment is cancelled
where the charge will be accelerated.
Fixed asset investments
Investments in subsidiaries are carried at cost less impairment.
The Parent Company accounts for the share based payments granted to
subsidiary employees as an increase in the cost of its investment
in subsidiaries.
Provisions
A provision is recognised in the balance sheet when the Group
has a present legal or constructive obligation as a result of a
past event, and it is probable that an outflow of economic benefits
will be required to settle the obligation. If the effect is
material, provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and, where appropriate, the
risks specific to the liability.
Employee benefits
The Group accounts for pensions and similar benefits under IAS
19 (Revised): "Employee benefits". In respect of defined benefit
schemes, the net obligation is calculated by estimating the amount
of future benefit that employees have earned in return for their
service in the current and prior periods, such benefits measured at
discounted present value, less the fair value of the scheme assets.
The discount rate used to discount the benefits accrued is the
yield at the balance sheet date on AA credit rated bonds that have
maturity dates approximating to the terms of the Group's
obligations. The calculation is performed by a qualified actuary
using the projected unit method. The operating and financing costs
of such plans are recognised separately in the income statement;
service costs are spread systematically over the lives of employees
and financing costs are recognised in the periods in which they
arise. All actuarial gains and losses are recognised immediately in
the Group statement of comprehensive income.
Payments to defined contribution schemes are charged as an
expense as they fall due.
10 Reconciliation of net cash flow to net cash
2016 2015
GBP000 GBP000
---------------------------------- ------ --------
Net increase / (decrease)
in net cash and cash equivalents 6,562 (20,267)
Decrease in borrowings 1,999 44,952
Fair value adjustments to
interest rate swaps - 59
Net cash at start of period 29,991 5,247
----------------------------------- ------ --------
Net cash at end of period 38,552 29,991
----------------------------------- ------ --------
Analysis of net cash:
Cash and cash equivalents 38,552 31,990
Unsecured loans - (1,999)
Net cash 38,552 29,991
----------------------------------- ------ --------
11 Income taxes
Current tax
Current tax is the expected tax payable or receivable on the
taxable income or loss for the year, calculated using a corporation
tax rate of 20% applied to the pre-tax income or loss, adjusted to
take account of deferred taxation movements and any adjustments to
tax payable for previous years.
12 Dividends
The following dividends were 2016 2015
declared by the Group:
GBP000 GBP000
Prior year final dividend
per share of 26.3p (2015:
23.0p) 35,273 30,838
Current year interim dividend
per share of 15.0p (2015:
13.7p) 20,139 18,402
-------------------------------- ------ ------
Dividends declared 55,412 49,240
-------------------------------- ------ ------
The Board has decided to propose a final dividend of 30.0p per
share in respect of 2016.
13 Earnings per share
Basic earnings per share
The calculation of basic earnings per share at 31 December 2016
was based on the profit attributable to ordinary shareholders of
GBP120,848,000 (2015: GBP128,008,000) and a weighted average number
of ordinary shares outstanding during the year ended 31 December
2016 of 134,178,673 (2015: 134,194,203).
Profit attributable to ordinary shareholders
2016 2015
GBP000 GBP000
------------------------------------ -------- --------
Profit for the period attributable
to ordinary shareholders 120,848 128,008
------------------------------------ -------- --------
Weighted average number of ordinary shares
2016 2015
--------------------------------- ------------ ------------
Weighted average number of
ordinary shares at 31 December 134,178,673 134,194,203
--------------------------------- ------------ ------------
Diluted earnings per share
The calculation of diluted earnings per share at 31 December
2016 was based on the profit attributable to ordinary shareholders
of GBP120,848,000 (2015: GBP128,008,000) and a weighted average
number of ordinary shares outstanding during the year ended 31
December 2016 of 134,322,449 (2015: 134,428,802).
The average number of shares is increased by reference to the
average number of potential ordinary shares held under option
during the period. This reflects the number of ordinary shares
which would be purchased using the aggregate difference in value
between the market value of shares and the share option exercise
price. The market value of shares has been calculated using the
average ordinary share price during the period. Only share options
which have met their cumulative performance criteria have been
included in the dilution calculation.
Weighted average number of ordinary shares (diluted)
2016 2015
--------------------------------- ------------ ------------
Weighted average number of
ordinary shares at 31 December 134,178,673 134,194,203
Effect of share options in
issue which have a dilutive
effect 143,776 234,599
--------------------------------- ------------ ------------
Weighted average number of
ordinary shares (diluted) at
31 December 134,322,449 134,428,802
--------------------------------- ------------ ------------
14 Related party transactions
Transactions between fellow subsidiaries, which are related
parties, have been eliminated on consolidation, as have
transactions between the Company and its subsidiaries during this
year.
Transactions between the Group, Company and key management
personnel in the year ending 31 December 2016 were limited to those
relating to remuneration, which are disclosed in the director's
remuneration report (which can be found on pages 68 to 80 and in
note 5.3 of the annual report).
Transactions between the Group, Company and Joint Ventures are
in note 5.5 of the annual report.
Transactions with Bovis Peer LLP and IIH Oak Investors LLP
Bovis Homes Limited is contracted to provide property and
letting management services to Bovis Peer LLP. Fees charged in the
period, inclusive of VAT, were GBP157,000 (2015: GBP153,000). None
of these fees are outstanding at 31 December 2016 (2015: nil).
In 2014, Bovis Homes Limited entered into a Joint Venture
arrangement with IIH Oak Investors LLP to hold 190 homes under a
private rental scheme.
As at 31 December 2016, loans of GBP3,503,504 (2015:
GBP3,667,675) are outstanding with IIH Oak Investors at an interest
rate of 6%. Interest charges made in respect of loans were
GBP220,000 (2015: GBP249,000).
15 Post balance sheet events
On 9 January 2017, David Ritchie, the previous Chief Executive,
notified the Group of his intention to leave the Company. David
immediately stepped down as Chief Executive of the Group and as a
Board Director but remained with the Group until 28 February 2017
to assist with the process of transition.
The Board appointed Earl Sibley, the Group's Finance Director,
as Interim Chief Executive on the same date and have initiated a
process to appoint a permanent successor.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR JLMFTMBTTBBR
(END) Dow Jones Newswires
March 29, 2017 13:00 ET (17:00 GMT)
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